Don’t overstretch for the perfect home
Homeowners have been warned not to borrow too much to get a dream home, in case interest rate increases leave them short of cash.
Credit Ombudsman Raj Venga warned that people could be over-extending themselves financially without considering how much their home loans would cost if interest rates went up.
The comment followed reports that Sydney’s auction clearance rates were at record highs.
Mr Venga said many lenders had made it tougher to get a loan after the global financial crisis, but people should also consider whether they could be caught out borrowing for homes they cannot afford in the long run.
He said a jump in New Zealand house prices had prompted the NZ RBA to impose restrictions that required people to have more money saved before they got a home loan.
Mr Venga said it was inevitable that interest rates would rise eventually and people should bear that in mind before buying an expensive house.
He said 33 per cent of complaints to the Credit Ombudsman were about people facing financial hardship and mortgage stress.